Financial Reporting Analysis: Provisions, Contingencies, and Leases

This report provides a comprehensive analysis of financial reporting standards, focusing on provisions and lease accounting. It begins by defining provisions and explaining the necessity of IAS 37, which addresses the recognition and measurement of provisions, contingent liabilities, and contingent assets. The report then examines specific scenarios, including the calculation of provisions for oil rig removal costs and warranty obligations. Furthermore, it delves into the benefits and implications of IFRS 16, the new Leases Accounting Standard, highlighting its impact on financial statements and the assessment of treasury flows. The report concludes with a list of references used in the analysis. This assignment is a valuable resource for students studying advanced financial reporting, offering insights into key accounting standards and their practical applications.

ADVANCED FINANCIAL
REPORTING
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Contents
Contents...........................................................................................................................................1
TASK 1............................................................................................................................................2
Provision......................................................................................................................................2
Discussion about the correct treatment under IAS 37, and, where appropriate, calculate the
amounts to be included in the financial statements for each situation........................................2
Task 2...............................................................................................................................................3
Benefits and implications of the new Leases Accounting Standard, IFRS16.............................3
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TASK 1
Provision
It can be define as the liability for uncertain time period. It is legal origination for business
organization. The obligation aeries due the actions of corporations. And it is indicating to other
tat this probability will be accepting some responsibilities. And it will declare the result that the
responsibilities will be discharge.
Discussion about the correct treatment under IAS 37, and, where appropriate, calculate the
amounts to be included in the financial statements for each situation.
IAS 37is related with the treatment of contingent liabilities and assets related to contingent which
outline the provision of liabilities and assets. The main object of this provision is to ensure all the
measurements are applied in systematic way. And sufficient noted sure prepared regarding assets
and lialbites so that user able to easily understand treatment of contingent liabilities and assets
(Breuer, Hombach and Müller, 2018).
IAS 37 is related with the following requirement of cases
It is related with the operating losses incurred in future. A provision is not able to recognize as
there will be no obligation at the ending of the financial year.
A contract related to onerous rises for provision
A provision related with the restructuring of cost when the obligation is made because main plan
s been affected to the restructuring plan.
1) For Rupert plc they need to identify provision which is related with the removal of cost
which is raise due to construction of the oil as this is made and it will be address in the
cost of the reacted assets. The liability arises due to production of oil. Thus they need to
build provision after 10 years payment (Barker and McGeachin, 2015).
2) Provision has to base regarding the warranty. Customers claims for warranty.
3) Provision has to be made to set up profit and loss mount.
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Task 2
Benefits and implications of the new Leases Accounting Standard, IFRS16
International Financial Reporting Standards is established by international accounting
standard board. It is related with providing essential guideline regarding lease. It is developed for
providing transparency for companies lease and assets and their liabilities useful for liabilities
will notable to linkage from shadows . The main object of this standard is to provide the lease
account in systematic manner and able users of financial statement to assess the values of the
treasury flow which is producing contract of easing.
Benefits of IFRS16
It provide flexible structure, it is more effective as compare to traditional funding system. In this
provision obligation to ownership and cost of obsolescence has been signed. It will useful in off
balance sheet financial. This standard lessee news to analysis the financial statement which direct
affect the raise of assets for given period of time (Sacarin, 2017).
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REFRENCES
Books and journal
Breuer, M., Hombach, K. and Müller, M. A., 2018. How does financial reporting regulation
affect firms’ banking?. The Review of Financial Studies, 31(4), pp.1265-1297.
Barker, R. and McGeachin, A., 2015. An analysis of concepts and evidence on the question of
whether IFRS should be conservative. Abacus, 51(2), pp.169-207.
Sacarin, M., 2017. IFRS 16 “Leases”–consequences on the financial statements and financial
indicators. The Audit Financiar journal, 15(145), pp.114-114.
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